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  Understanding CAT
Principles on which Computer-assisted Trading is based
Principles
Short-term price movements are entirely random
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1. Short-term price movements are entirely random
Buy and sell orders flow into the markets from all over the world. Every order is particular to the individual or institution placing the order. 

Over short periods stock prices tend to evolve at random.


Example:
Shares of A monitored at 15-min. intervals over 2 trading days.




... and of B over the same 2-day period


By continuously monitoring their short-term movements ....

.... an investor wanting to buy one and sell the other could have saved money by using computer-assisted trading to time his transaction properly.



2% could have been saved either way within 2 trading days by using Computer-assisted Trading to time the transaction.


The above share movements could be those of any two stocks. They have nothing to do with the fundamentals of the companies involved, but only with the random inflow of orders and general market trends.

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